Plenty of automakers have tried appealing to commitment-averse buyers who no longer want to own cars. But Volvo has left the competition in the dust.
The luxury brand is enjoying robust demand for its Care by Volvo subscription program that is simpler than the normally paperwork-laden car-buying process: One flat fee covers insurance, taxes and "digital concierge services" like fueling, cleaning and valet pick-up and drop-off for vehicle maintenance.
Launched in the U.S. late last year, the initiative is still going strong even as rival vehicle subscription services suffer setbacks. Volvo hit its yearly subscription goal within the program's first four months, says Bob Jacobs, Volvo Car USA's VP for product, marketing and communication, who declined to specify the goal. "There's definitely demand for this program," he says.
The demand does not seem to stop with the subscription service. Volvo's total U.S. sales rose 27 percent to 81,256 vehicles in the first 10 months of the year, according to Automotive News. That compares with a 0.5 percent gain for the entire industry. The surge is led by Volvo's lineup of SUVs, including the new XC40 compact crossover, which is helping the automaker lure younger buyers. Volvo, based in Sweden and owned by China's Zhejiang Geely Holding Group, began making its first vehicles in the U.S. this year at a new plant in South Carolina.
The XC40 was the first car offered under the Care by Volvo program, at $650 a month. Volvo requires a two-year commitment, but consumers can swap in a new model after the first year. Other car subscription programs come with shorter terms, but Volvo has found a sweet spot that seems to be working economically. Cadillac, for example, recently confirmed that its subscription service, the $1,800-a-month Book by Cadillac program, will be suspended on Dec. 1. The program proved more costly for the brand to run than it had expected, The Wall Street Journal reported, citing people familiar with the program.
"The difference between some of the other programs and what we're doing is you keep the car for a year, so ... it's not a car you are trading in every other weekend," says Jacobs. He likens it to the way people buy smartphones.
An ad campaign by WPP's Grey New York plays up Volvo's subscription aspect by drawing on other industries that have undergone transformations. "You used to buy music, too," states one spot, which describes the XC40 as "the car you subscribe to."
"Luxury automakers have begun offering subscriptions in addition to a purchase or lease, but Volvo may well have landed on the right formula," says Michelle Krebs, an executive analyst for Autotrader, suggesting that it's more attractively priced than other plans.
Volvo is staying on the cutting edge in other ways, too. For instance, it's part of Amazon's Key In-Car service in which packages are delivered straight to parked vehicles. The program uses a system in which delivery drivers get one-time access to cars so they can drop packages in the trunk or back seat. Customers get a notification once the delivery is complete and the vehicle is relocked.
"This mix of car and commerce is starting the next wave of innovation," said Atif Rafiq, chief digital officer at Volvo Cars, in a statement earlier this year. "And we intend to be at the forefront."
